RBI · Banking Regulation
RBI tightens NBFC income recognition rules on stressed asset acquisitions
Unrealised interest on acquired non-financial assets cannot be booked as income, with past recognitions to be reversed by Sep 2027.
What changed
- Inserted paragraphs 40C and 40D in Chapter II on income recognition for SNFA
- Accrued unrealised interest from extinguished exposure prior to SNFA acquisition cannot be recognised as income
- Income from SNFA to be recognised as non-interest income only when realised
The read
RBI has acted. From October 1, 2026, NBFCs cannot recognise as income any accrued but unrealised interest from an extinguished exposure prior to acquiring a specified non-financial asset. Income already recognised before September 30, 2026 must be reversed by September 30, 2027 to the extent remaining unrealised. Any income received from such an asset becomes non-interest income only in the year it is realised; expenses incurred are recognised in the year incurred. The move prevents NBFCs from booking paper gains on stressed assets and aligns them with banking prudential norms.
Key numbers
- Effective date: October 01, 2026
- Reversal deadline: September 30, 2027
- Recognition as of: September 30, 2026
Primary source: rbi.org.in